All Our Yesterdays: Reconsidering Revenue Sharing

“My people and I have come to an agreement which satisfied us both. They are to say what they please, and I am to do what I please.” – Frederick the Great

For more than three decades, the citizens of Albemarle County have been forced to live with the maxim of Frederick the Great, as they are forced through legal coercion, to part with millions of dollars annually, to be utilized at the whim of the capriciousness of those at the helm of Charlottesville City Council. The current “discussion” regarding the relocation of the Albemarle County Court facilities, into Albemarle County proper, has sparked questioning and debates, as well as it should, regarding the relationship between Albemarle County and the City of Charlottesville. I remember this issue well. It was in fact, the first issue I was allowed to vote on, having just reached legal voting age when the referendum was posed to the local citizens. I was also serving as a reporter for a local newspaper at the time, and this was very much a hot button issue. This area has radically changed since the inception of the ill-conceived Revenue Sharing Agreement, (RSA). There has been such an influx of population that many county residents are, through no fault of their own, ignorant of the RSA and its implications and impact.

If one visits the county website, the RSA is briefly mentioned. There is no significant amount of verbiage attached to the description. It simply reads as follows:

What is the Revenue Sharing Agreement and how does it impact revenues?
In 1982, Albemarle County and the City of Charlottesville entered into a revenue sharing agreement in which both jurisdictions agreed to share tax revenues in return for total immunity from any annexation attempts by the City. The City was proposing a significant annexation of County territory at that time to increase the City tax base. The proposed agreement was approved by County voters in a referendum.

The agreement provides that the County and the City shall contribute annually to a Revenue and Economic Growth Sharing Fund which is then divided between them pursuant to a formula based on the City’s and County’s population, “true real property tax rates” as determined by the Virginia Department of Taxation, and the assessed value of real property. Based on this formula, the agreement has required the County to pay the City a revenue sharing amount each year since 1983 in an amount that is approximately equivalent to revenue generated by ten cents of the County’s tax rate. The revenue sharing payment in FY15 was $16.46 million.

Can the County discontinue the Revenue Sharing Agreement?
The Revenue Sharing Agreement is legally binding and must remain in effect until one of the following occurs: The City and County are consolidated or otherwise combined into a single political subdivision, or The concept of independent cities is altered by state law in such manner that real property in the City becomes part of the County tax base, or The City and County agree to cancel or change the agreement.

No big deal, right? Wrong! It was and continues to be a most significantly huge deal.

Over the years, I have found myself having to explain this parasitical agreement in school PTO meetings, etc., when those citizens new to the county, were so favorable to increase the tax burdens, in order to benefit the school system in particular. When they finally wrap their heads around the fact the that .10 cents of every tax dollar coming into Albemarle County is surrendered to the City of Charlottesville, well, that changes the acquiescence to increasing taxes considerably. Which ultimately produces the question that universally can be summed up as, “That’s nuts. How do we get out of this?” Sadly, as was written and agreed upon at the time, by a citizenry incapable of visualizing the future, and the impact of hanging the RSA millstone about the necks of future generations, they foolhardily voted in favor of a referendum with no escape clause. Just as history appears so generic to those looking back upon it, it is told differently by those who actually experienced it.

In 1762, Charlottesville was by today’s standards, little more than a mere village made up primarily of Water, Main, Market and High streets. and thus it remained for a half a century, adding less than a half a square mile in 1818, and extending only a few blocks beyond High Street, to the eastern side of Park Street For the most part, Charlottesville remained relatively docile until it became an incorporated “city” in 1888, and even at that, though it had quadrupled in size, it still was less than two square miles. It took almost thirty years for the city to enlarge, expanding less than three square miles in 1916, and then doubling that when it expanded again slightly less than three square miles in 1949, making its footprint just more than six square miles. In 1963, it once again enlarged itself by nearly four square miles, consuming what remained of McIntire Park, the Johnson Village and the Cleveland Avenue area, AND most desired prize of all, Barracks Road Shopping Center, the preeminent financial generator at the time. The Charlottesville City Council obtained an almost unquenchable thirst for easy cash, and wielding the sword of annexation against the county became the standard operating procedure. In January of 1971, the City filed a petition to annex yet another twelve square miles of Albemarle County, however, having failed to properly follow stipulated statutory guidelines, the City’s petition failed in January of 1972. Just one month later, in February of 1972, the City corrected and passed a corrected annexation ordinance, however, this also failed as state laws regarding annexation at that time stipulated that the City must wait five (5) years, until it may try again to annex. The Supreme Court upheld this dismissal in its opinion dated November 26, 1973 in Charlottesville v Albemarle 214 Va. 365 S.E. 2d 551. Concurrently, the state had imposed by then, a moratorium on annexation. In December of 1979, the City and the county BOS began sessions to negotiate the RSA. In July of 1980, the State reversed itself and lifted the moratorium on annexation. In February of 1982, the RSA was publicly announced.

On a quick view, it seems simple, but that’s only with the examination of static facts, dates, and figures. But as Paul Harvey used to say, there is a “rest of the story” Those of us native to Charlottesville will recall things with a slightly different backstory, and it went something like this: Charlottesville Fashion Square Mall (CFSM )was originally slated to be located on Rt. 29 across from what was Sperry Marine,(Northrup-Grumman presently). The City planning director ultimately tried the patience of CFSM developer, Charles Farber, who needed to either build CFSM or move on, approached the county with locating it at the corner of Rio and 29. A move that the county welcomed with arms wide open. The City, having overplayed its card and sustained by its own sense of self-importance, too later realized that they had allowed the best economic golden goose to fly from its grasp, scrambled to take action. Thus was born the threat of annexation, and more loss of county economic assets. Understand the timing of all of the events. The Mall’s relocation into Albemarle County and the threat of annexation/RSA, negotiations transpired almost simultaneously to the State’s decision on annexation. One of the members of the county BOS at the time, was a great personal friend and somewhat of a mentor in regards to good citizenship and understanding present policy decisions in terms of future impact, and he was vehemently opposed to the RSA, citing the fact that were the County to hold off a year, the legislative landscape may appear more favorable to counties. A prediction that was ultimately proven correct.

The City of Charlottesville was also somewhat ambivalent about actually holding the sword of annexation too tightly to the County’s throat, because, as they were not excited about the acquiring the electorate required in order to expand City limits to engulf the Mall, and also what was then called Shopper’s World, (29th Place). At that time, the county was much redder, and City Council feared the potential shake-up to their rule, if they annexed that area to secure the economic prize of the Mall.

I remember that election, it was my first time in the booth. I researched and understood the implications of what was being presented, but, very few my age were worried about such things and did not even cast a ballot. The older generation, wanting to be friendly and not comprehending the implications of their affirmative vote once they became a statistic in the County’s long page of history, citied the desire for continued good relations with the city. They chose to ignore the fact that the city’s own feckless actions led to the relocation of CFSM from the City into the county, as well as the fact that just twenty years prior, the county lost Barracks Road Shopping Center to the city in the same manner, and in what was the most egregious aspect of the RSA, county taxpayers would see no return on their investment.

This referendum was also placed before the citizenry at a time when the tremendous population growth of Albemarle County was not even on the radar screen for most. The tremendous needs of infrastructure and educational resources were unforeseen at the time the vote was taken, at least not by those casting their ballots. The result? The City garnered itself a means to provide generous pay hikes and benefit programs for its employees, and implement and maintain social programs that the County could never afford, and history has demonstrated this repeatedly. All the while, the County citizens would not have even one at-large voice on the council, with which to express their interests or concerns. Talk about taxation without representation! Those of us who reside in the rural parts of the county, require little in the way of services. We require neither water nor sewer, and many must wait for some time when emergency services are required. Many citizens will live their lives in Albemarle County, requiring nothing! They will not have received any return on the investment that they have made through their payment of taxes. Much less, what the City has seen fit to expend in its capricious fashion.

Charlottesville’s beginning was on some thirty acres of Albemarle County land, and over time, grew to consume nearly seven thousand more. When the actual taking of land proved to be politically risky to the City, it chose instead to consume County finances, and has done so for more than thirty years totaling some $281 million. Money spent as if it were “mad” money or just a surprise discovered in the City’s kitty. Presently the County is projected to hand the City a check for 2016 in the amount of nearly $16 million dollars, while County residents are asked to pony-up more cash to keep their growing school system functioning.

The City showed its true colors and just how high a standing it had for its County cousins, with the objections to the reexamination of the Composite Index in 2010 and 2012. I believe it is time the County return the favor. If no release from the RSA is to be had, and no cooperation from the city apparent, (such as the composite index), then it is incumbent upon the County to utilize what few options are available to her. I am not at all impressed by David Toscsano’s suggestion to the City, that it use a portion of the RSA to fund projects that would benefit both communities. Such a suggestion is akin to calling a bull a steer, he is appreciative of the honor, but would rather have what’s coming to him. In the case of the county, it is our financial base.

The promise of increased parking is of little matter, as it is too little too late, and serves the City as much as it does the county.  In the long term, the potential loss exceeds the present gain. The County must think in terms of two or three generations to come, as this opportunity is a rarity.

If the only viable means of offsetting the unfair and ill-conceived burden to County taxpayers, can be found in the relocation of the county courthouses INTO Albemarle County, than it must be fully explored and supported. The County has an opportunity here, to perhaps at least lessen the weight of the millstone about its neck, and failure to utilize this opportunity, will condemn future county citizens to a situation that may not see such an opportunity again for a few lifetimes.

For those of you who may wonder exactly what the Revenue Sharing Agreement looks like, here it is in all of its specious glory.

ANNEXATION AND REVENUE SHARING AGREEMENT
This agreement is between the COUNTY OF ALBEMARLE, Acting through its Board of Supervisors,
and the CITY OF CHARLOTTESVILLE, acting through its City Council:

SECTION 1. PURPOSE,
This agreement arises out of the annexation statues found in Title 15.1 of the Code of Virginia. The Board of Supervisors recognizes that those statues permit the City to initiate court proceedings to annex County territory; however, the Board believes annexation to be ineffective as a solution to the social and financial problems of cities, and generally opposes the concept of annexation on philosophical grounds. The City Council believes that annexation has been historically effective as a method for cities to increase their tax bases and provide for effective delivery of urban services and that the City would be justified in asking to annex parts of the County at this time.

In spite of these philosophical differences, the City Council and the Board of Supervisors realize that their jurisdictions have much in common and that the interests of their citizens often extend across jurisdictional boundaries. They are proud of many instances in which their two governments have cooperated to serve the interests of those citizens, and they share the hoped of a future filled with more cooperative measures, perhaps ultimately resulting in the combination of the two jurisdictions into one.
Whatever the merits of annexation might be, an annexation suit initiated by the City at this time would threaten the spirit of cooperation now existing between the City and the County governments. It would involve great expenditures of time and money, and it would introduce an element of uncertainty into the political and governmental processes of both jurisdictions which both City Council and the Board of Supervisors would prefer to avoid.

Recognizing all of these circumstances, the Board of Supervisors and the City Council have sought through negotiations to find a solution which would lessen the City’s need to annex County territory and thereby permit the County to proceed with its planning and other governmental processes free of the threat of annexation. Both bodies believe that the revenue and economic growth sharing plan described in this agreement is an equitable solution, which permits both jurisdictions to share fairly in the property tax revenues created by future economic growth in the community regardless of whether that growth occurs in the City or County.

SECTION 2. REVENUE AND ECONOMIC GROWTH SHARING PLAN
A. Agreement to Contribute and Share
Pursuant to Va. Code Ann. §15.1-1166, for as long as this agreement remains in effect, the County and City agree annually to contribute portions of their respective real property tax bases and revenues to a revenue and economic growth sharing fund as described in this Section. Each agrees to transfer to the other the net amount determined by applying the calculations described in this Section to the fund created.

B. Determination of Contributions to Fund

The City and the County will each annually contribute to the revenue and economic growth sharing fund, from their respective real property tax revenues, thirty-seven cents for each one hundred dollars of value of locally assessed taxable real property, improved and unimproved, within their respective political boundaries.

The city manager and county executive, or their designees, shall meet in the month of January in each year in which the agreement is in effect to determine the amount each jurisdiction will contribute to the fund in the ensuing fiscal year. The sum of the contributions of the City and County shall constitute the “fund” as referred to below.

In each year that this agreement is in effect, the assessed values used to calculate the respective contributions shall be those reflected on the land books of the two jurisdictions for the most recent year for which population and true tax rate figures are also available, as provided in Subsection D. However, for any year in which one jurisdiction conducted a general reassessment and the other did not, the contribution of both jurisdictions shall be based on the assessed values for the most recent year in which both conducted a general reassessment, plus subsequent new construction and less subsequent demolition in both jurisdictions.

C. Determination of Distribution of Fund

After computing the total contributions to the fund, the designated officials, using the steps set forth in Subsection D, shall determine the distribution of the fund for the ensuing fiscal year. This determination shall be used by the two jurisdictions in the preparation of their budgets and for fiscal planning purposes.
The distribution of the fund and the resulting net transfer of funds shall be made initially on January 31, 1983, and on each January 31 thereafter that this agreement remains in effect,

D. Procedure for Computing Distribution

The procedure to compute distribution of the fund requires the determination of the following figures:
Population of the City
Population of the County
True Real Property Tax Rate of the City
True Real Property Tax Rate of the County

The population figures shall be determined by official United States Census figures for years in which a census has been taken. For years between censuses, the population figures shall be the final population estimates of the Tayloe Murphy Institute of the University of Virginia.

True real property rates shall be as determined by the Virginia Department of Taxation.
In the event the Tayloe Murphy Institute or the Department of Taxation ceases to make such determinations, the city manager and county executive shall jointly select another source for such figures.
The distribution shall be computed as follows:

Step 1. Compute relative population indices for both jurisdictions by dividing each jurisdiction’s population by the sum of the populations for both jurisdictions.
Step 2. Compute relative tax effort indices for both jurisdictions by dividing each jurisdiction’s true real property tax rate by the sum of the true real property tax rates for both jurisdictions.
Step 3. Compute a composite index for each jurisdiction by averaging the relative population index and the relative tax effort index for the respective jurisdictions.
Step 4. Multiply the composite index of each jurisdiction by the total contributions to determine each jurisdiction’s share of the fund.
Step 5. Compute the net transfer by finding the difference between each jurisdiction’s contribution and its share of the distribution.

Each time the contribution and distribution are computed the computation shall be based on the assessment, population and true tax rate figures for the most recent year for which all three figures are available.

EXAMPLE
This example shows how such a computation would be made for the Fiscal Year 1983 (July 1, 1982 – June 30, 1083), using the figures for the most current year for which all three elements are available, 1980.
Contributions to Revenue and Economic Growth Sharing Fund Total Assessed Values of Taxable Property (Jan. 1, 1980):
Charlottesville: $651,387,930
Albemarle: $1,229,123,396
These multiplied by 37 cents per $100 of valuation, yield the following respective contributions:
Charlottesville: $2,410,135
Albemarle $4,547,759
Total Contributions: $6,957,894
Distributions (based on 1980 populations and true tax rates for 1980):
Step 1 Relative Population Indices
Jurisdiction Population Index
Charlottesville 39,916 .4171
Albemarle 55,783 .5829
Totals 95,699 1.0000

Step 2 Relative Tax Effect Indices
Jurisdiction True Tax Rate Index
Charlottesville .91510 .6474
Albemarle .49848 .3526
Totals 1.41368 1.0000
Step 3 Composite Indices
Jurisdiction Composite Index
Charlottesville .5323
Albemarle .4677
Total: 1.0000

Step 4 Actual Distribution
Multiply Composite Indices by amount of Total Contributions ($6,957,894) to obtain the following distribution of the pooled amount:

Jurisdiction Composite Index Distribution
Charlottesville .5323 x $6,957,894= $3,703,687
Albemarle .4677 x $6,957,894= $3,254,207
Total $6,957,894

The net transfer of funds which will result from this formula is the difference between each jurisdiction’s contribution and its distribution. The 1980 figures yield the following net transfer from Albemarle to Charlottesville from this example:
City County
Distribution = $3,703,687 $3,254,207
Contribution= $-2,410,135 $4,547,759
Net Transfer = +$1,293,552 -$1,293,552
As can be seen from this example, the contribution of each jurisdiction will rise or fall as the tax base rises or falls, and the distribution will increase or decrease as a combination of relative populations and relative-tax rates.

E. Limitation on Distribution
The contributions, distributions and the net transfer of funds for fiscal year 1983 shall be as shown in the example in subsection IID above. In all subsequent fiscal years, the amount transferred to either jurisdiction for any year shall not exceed one tenth of one percent (.1%) of the total locally assessed value of the taxable real estate used to compute the contribution of the other jurisdiction for that year.

F. Disputes About Compensations
In the event the city manager and county executive cannot agree with regard to any computation made under this agreement or any figure to be used in such computations, they shall jointly select a person knowledgeable about governmental finances to resolve dispute.

SECTION 3 ANNEXATION
During the time this agreement is in effect, the City will not initiate any annexation proceedings against the County, with the exception that the City may, if it chooses, petition for annexation of that property presently owned by the City, adjacent to its corporate limits, known as Pen Park. A plat of Pen Park property is attached to this agreement and marked Exhibit A. If the City decides to petition for annexation of Pen Park, the County agrees that it will not oppose that annexation. The City further agrees that while the agreement is in effect it will oppose any petitions filed by County residents or property owners seeking to have territory annexed by the City.

SECTION 4 DISCRIMINATORY TAXES
The County and City agree that, except for ad valorem property taxes, taxes on restaurant meals, transient lodgings or admissions to public places or events and other general or selective sales or excise taxes, neither jurisdiction will, during the life of this agreement, impose or increase any tax that would affect residents of the other jurisdiction if the other jurisdiction is not legally empowered to enact that tax at the same rate and in the same manner. This provision is specifically intended among other things to ensure that neither jurisdiction will enact a so called “commuter” or payroll tax unless the other jurisdiction has the legal authority to do so.

SECTION 5 CONSOLIDATION STUDY
The City Council and Board of Supervisors agree that immediately after the approval of this agreement pursuant to Section 7 they will appoint a committee to study the desirability of combining the governments of the two jurisdictions, or some of the services presently provided by them, either in a consolidation as provided in Va. Code §15.1-1131, or in some other manner for which special legislation might be requested.

The study committee will be comprised of two members of City Council, two members of the Board of Supervisors, the City manager and the County executive. Each governing body shall select the members to represent it on the committee. The city and county attorneys will attend the meetings of the committee and advise it, but will not be voting members.
The committee will begin meeting as soon as possible after its appointment and will make a preliminary report to the Board of Supervisors and City Council within six months after its first meeting to set forth the manner in which it thinks the study should proceed, including a request for whatever staff or other assistance it anticipates will be needed. The City Council and Board of Supervisors agree to act on the preliminary recommendations within thirty days after receiving them.
A full public report of the final conclusions and recommendations of the study will be made to both governing bodies not later than January 30, 1983. However, the Board of Supervisors and City Council may jointly agree to extend this time limit.

SECTION 6 DURATION OR AGREEMENT
This agreement will remain in effect until:
A. The City and County are consolidated or otherwise combined into a single political subdivision; or

B. The concept of independent cities presently existing in Virginia is altered by state law in such a manner that real property in the City becomes a part of the County’s tax base; or

C. The City and County agree to cancel or change the agreement.

SECTION 7 APPROVAL OF AGREEMENT
This agreement shall be effective when it has been signed by both jurisdictions, following the adoption of resolution approved by majority votes of the City Council and Board of Supervisors after publication of notices and public hearings, as required by Va. Code §15.1-1167, and in the case of the County, following approval by the qualified voters of the County in a referendum conducted pursuant to law.

SECTION 8 SEVERABILITY
The provisions of Section II and III of this agreement are not considered severable, and any determination by a court of competent jurisdiction that the revenue and economic growth sharing plan or the City’s agreement not to initiate or support annexation petitions (except for Pen Park) is invalid shall cause this entire agreement to be null and void. All other provisions are considered severable, and a determination that any of them is invalid shall not affect the remaining provisions.

SECTION 9 BREACH OF AGREEMENT
If either party deems the other to have breached any provision, it shall so notify the other in writing, and the party deemed to have breached the agreement shall have 60 days to remedy the breach. In the event remedial action has not been taken within the 60 day period, the aggrieved party shall be entitled to seek specific performance of the agreement in the circuit court of the City or County.

IN WITNESS WHEREOF the City Council has authorized the Mayor to sign this agreement by a resolution adopted MARCH 15, 1982, and the Board of Supervisors has authorized its Chairman to sign it by results of a referendum of the qualified voters conducted MAY 18, 1982.

Signed on May 24, 1982
By
City of Charlottesville Mayor
Frank Buck
County Of Albemarle Board of Supervisors Chairman
Gerald Fisher